Selling your business? Here are five tips to consider when contemplating the sale of your business.

  1. Be prepared.

Buyers are looking for companies with solid profits and, most importantly, cash flows.  However, even if your business fits this profile, it is not adequate to close a deal.  Most transactions that fall apart do so as a result of findings during due diligence.  This can be for a variety of reasons including insufficient documentation or inaccuracies in financial data.  DON’T let this happen to you. If you or your business aren’t properly prepared for sale, it will be easily detected in the initial stages of marketing and buyer engagement and can perpetuate an extended sale process rife with frustration. Here are some common documentation to have readily accessible:

  • 3-5 years of financial statements and tax returns
  • Lease agreement(s)
  • Franchise agreement
  • List of, and market value, of assets
  • Contracts – vendor, customer, employee, union, etc.
  • Bank statements (1-3 years)

Put yourself in the Buyer’s shoes – what would you want and / or need to feel comfortable in the accuracy of the financial and non-financial data?

2. Tell your story.

Numbers alone do not sell a business.  A qualified buyer looking to acquire an existing business understands numbers don’t always tell the full story.  Nor will they be prepared to assume ownership without understanding more about the business.  Grab and hold the attention of potential buyers with high quality marketing materials that compels a buyer to acquire your business.

“Why are you selling your business?” will be one of the first questions buyers ask.  Selling a business can be to enter retirement, pursue new ventures and interests, disengage from a failing or cash-strapped business, or due to death or illness, it is important to have an honest response.  Whether the business is thriving or has hit a rough patch, almost every business has attractive attributes which, if articulated well, can attract potential buyers and generate substantial economic benefits.

Critically analyzing your business through the lens of your institutional knowledge, you, the business owner, are in a solid position to offer the areas of strengths and opportunities as well as weaknesses of your business.  Don’t be afraid of sharing weaknesses – every business has them and they can be turned into opportunities with well thought-out and expressed mitigation plans.

A certified business intermediary will capture the compelling story of your business in the past, present, and future.

3. Have realistic expectations.

Every business owner that aspires to sell their business has a number in mind.  However, pricing your business is more complex than throwing a number out to the market and seeing if there are any takers.  It can become one of the most challenging aspects of selling your business.  Before getting set on a number, it is important to have a certified business intermediary provide a business valuation or broker’s opinion of value.  Brokers draw from market data not readily available to the general public as well as years of personal experience to ensure the business is correctly priced – not too low, but not too high.  The pricing methodology employed by the broker will provide credibility and defensibility to the valuation.

Business owners seeking to sell often have unrealistic expectations of the time and duration required to sell as business.  Businesses can take anywhere from a few months to two years (or more) to sell.  The average is between six to nine months.  The sale process requires patience and the ability to run the business while committing time to support the sale.

4. Pick the right team.

From becoming educated on the sale process to the intricate legal and tax details, lean on your team of qualified transaction advisors to do what they do best.  A certified business intermediary has demonstrated competency in facilitating business sales through education, training, experience, and ethics.  He or she has developed a network of transaction professionals that will provide the highest level of service, professionalism, and advocacy.

Afraid of the tax consequences a sale may have? – ask your accountant.  Don’t understand key legal requirements? – ask your transaction attorney.  Afraid to prepare and execute the sale of your business? – ask your certified business intermediary.

5. Embrace the emotions.

Emotions are individualized.  However, selling a business often entails a myriad of emotions for the seller regardless of the circumstances.  Understand that there will be emotions and embrace them.  Talk to your certified business intermediary and maintain an open line of communication.  Brokers are accustomed to such emotions and, while they are not psychologists, good intermediaries have an adept ability to listen.